Research reveals franchise performance in global first

Written on the 12 June 2011 by Fiona Taylor

Franchisor performance can now be measured, for the first time globally, with the launch of new research findings from Griffith University’s Asia-Pacific Centre for Franchising Excellence.

The Franchise Performance Metrics research enables franchisors to compare their franchise model across a range of key performance indicators (KPIs) with other Australian franchises.

Lead researcher and Asia-Pacific Centre for Franchising Excellence Director Professor Lorelle Frazer said now franchisors could gain new insights into how they really perform, to enhance business planning and resource allocation.

“Previously franchisors could benchmark across a specific industry, however not across ‘franchisor-ing’ allowing little guidance on franchise support or recruitment costs, as well as a wide range of metrics,” Professor Frazer said.

The top findings from the Franchise Performance Metrics research are being launched at special events co-hosted by Westpac, in Sydney, Melbourne and Brisbane this week, before becoming publicly available.

The Centre is also hosting a public webinar reporting the key findings of the research on Wednesday, July 6 at 3pm at no cost. To register visit: www.franchise.edu.au

Professor Frazer said the research was based on financial data from 2009 and 2010 and although showed the sector fared quite well throughout the Global Financial Crisis (GFC), there were some interesting findings.

“Franchisors generally reported their model achieving sound return on investment for franchisees, however the data reveals on average franchisees are slower making payments, which could indicate cash flow pressure,” Professor Frazer said.

“Also while franchisee numbers grew by 16 per cent on average, most groups actually recorded a loss in existing franchisee numbers, with new sales not increasing overall existing numbers.

“This means there’s evidence from the GFC of consolidation with site losses greatest in systems with lower return on investment ranges.”

The research also revealed while 100 per cent of franchisors track franchisee sales, only half track franchise margins and even less (33 per cent) track franchisee expenses and profit on a regular basis.

“These are key drivers of business profitability and vital measures to provide an accurate view of trends and emerging issues within a franchise model,” Professor Frazer said.

“These are also areas where franchisees are now seeking greater support from the franchise head office, and are skills franchisors rate franchise support staff less strongly on, particularly compared to sales skills.

“This highlights there may be a gap in franchise field support and franchisee needs.”

The research also looked at net income received by franchisors from each franchisee, average franchisee recruitment costs, franchisee recruitment conversation rates as well as franchisee return on investment and more.

Professor Frazer said the Centre planned to continue to conduct the Franchise Performance Metrics research at least annually to provide franchisors with this valuable business planning tool and further best practice across the sector.

Franchisors are invited to participate in the research (and access the findings at a reduced cost). To purchase the Franchise Performance Metrics Report (released August 1, 2011) or to participate in the research visit: www.franchise.edu.au/franchise-performance-metrics.html.

A pre-purchase discount is available for all purchases before July 30.